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Mutual Funds; Closed-End Gains for 1991

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January 19, 1992, Page 003014 The New York Times Archives

As a group, closed-end stock funds rocketed in 1991, gaining an average of 41 percent for the year, compared with a rise of 30.5 percent in Standard & Poor's 500-stock index. Prices for closed-end funds, which trade on exchanges like common stock, are set by supply and demand so fund shares can trade at a premium or discount to the value of the securities in their portfolios.

Their 1991 performance showed how the leverage built into closed-end funds works: because the stock market was so strong, the shares held by the funds rose. And because the funds did well, investors clamored for them, pushing up prices of the closed-end-fund shares themselves, said Thomas J. Herzfeld, a Miami-based investment adviser.

As a result, discounts for the funds narrowed sharply in 1991. On average, closed-end-fund shares traded for 7.5 percent less than the value of the securities held by the funds at end of 1990 and for about 4.7 percent less at the end of 1991.

A version of this article appears in print on January 19, 1992, on Page 3003014 of the National edition with the headline: Mutual Funds; Closed-End Gains for 1991. Order Reprints|Today's Paper|Subscribe